The Central Otago District Council last week agreed to update a flawed procurement policy after a damning audit report.
Accounting firm Deloitte presented a report to the council’s audit and risk committee in March after reviewing seven complex procurement contracts ranging in value from $130,000 to $4 million.
The two key findings were inconsistencies in implementing the existing policy and a lack of monitoring, reporting and record-keeping on procurement activities.
Risk and procurement manager Amelia Lines, in her report said the council implemented a procurement policy in 2020 but the 2022 Deloitte audit found it was not being followed.
The 66-page policy was found to be overly complex, contradictory in places and unnecessarily long.
Deloitte’s report says they found the policy was neither widely used nor referred to when procurement activities were undertaken.
Ms Line’s role had been vacant from January 2022 until May this year, which meant there was a lack of oversight. During this time staff from other departments carried out procurement themselves.
The report concludes the council’s procurement controls were informal and inadequate. While policies, manuals and procedure were clearly defined and aligned with good practice, compliance with them was inadequate and reporting to management was a weakness.
In six of the seven contracts audited there was no evidence of due diligence conducted over the proposed supplier nor was there any formal risk assessment conducted.
In five contracts there was no procurement plan prepared and in four contracts policy and processes were not met due to time constraints, there was no evidence of consideration of conflicts of interest and related forms were not completed before the contract was awarded.
In two contracts conflicts of interest were identified but not formally documented.
A lack of consistency meant the council was at risk of inappropriate spending and could miss warnings of problems, the report said.
Additionally as documents were not being stored centrally there was a risk of information being lost or even financial loss if documentation supporting decisions could not be provided.
Ms Lines told councillors the policy had undergone a significant review which had resulted in a simplified document.
‘‘The main difference . . .is that it is no longer 66 pages long, it’s a much more concise document.’’
Rising costs had led to changes in the values for different procurement requirements, she said.
A market tender would now be required for $200,000 or more, up from $50,000.
Business support group manager Saskia Righarts said the key focus was to roll out the new policy and, following up on the Deloitte audit, to ensure there was governance oversight of all activities.
Deputy mayor Neil Gillespie said it was important the policy was well known and understood.